It's been a phenomenal run for the car they didn't even care to christen. But like all phenomenal runs, this one, too, is coming to an end. Now, MUL has to identify a substitute, while prolonging the 800's life to the extent possible.

By Suveen K. Sinha

MARUTI 800: It's days are numbered

Maruti Udyog's dapper CEO Jagdish Khattar is usually politically correct, but sometimes the head of India's largest carmaker lets his guard down a bit. Like during internal meetings, when Khattar repeats his favourite saying: ''We don't sell Maruti; people buy it.'' The reference here is to Maruti Udyog's eponymous small car, the diminutive 800cc, which in December this year turns 18, a miraculous feat for a vehicle that has virtually not undergone any major modifications since it was first launched in 1983. But Khattar's oft-repeated pronouncement, notwithstanding its tinge of arrogance, is fast losing its ring of conviction. For, the end of India's largest-selling car model may now be just around the corner.

Although Khattar and his top team at Maruti steadfastly maintain that the company will continue to roll out its two entry-level cars-the 800cc hatchback and its first cousin, the Omni van-even insiders at Maruti's Gurgaon plant admit that the company is working overtime trying to extend the lifecycle of the two, clearly antiquated models.

Of course, there's no denying the spectacular run that the two 800cc stablemates have had. When the hatchback was first launched back in December 1983, it didn't ever have a name, only a numeric reference to its cubic capacity to identify it by. As for the Omni (it was more fortunate and had a name to boast of, right at birth), which hit the roads 11 months later, it had the aerodynamics of a brick. Yet, together, 2.5 million units of the two models have been sold so far. That is a staggering 50 per cent of all cars sold in the last 18 years. True, that doesn't sound half as impressive as what Honda has done with its oldest surviving model, the Accord, selling more than 10 million cars since the launch of the model back in 1976. Remember that the Accord has had to fight against global brands in developed markets through its entire lifecycle, has gone through six major revamps in the last 25 years, and its current version is vastly different from what its original avatar was like. In contrast, for the first nine years, the Maruti models enjoyed a protected fief in a market where their only other competitors were HM's Ambassador and Premier's Padmini, cars whose antecedents date back to the 1940s. In comparison, in 1983, when the first 800 rolled out on the Indian roads, it was a technological marvel.

MUL CEO Khattar won't admit it, but the future of the 800 worries him.

Back then, annual car sales were barely 40,000, split evenly between the Ambi and the Premier. Today, push started by a complete deregulation of car manufacturing in the mid-1990s, the market has grown close to 600,000 a year. All the big names of the global automobile industry, except Volkswagen, are here and have launched some swanky models, which they thought were the best picks for the Indian market and driving conditions. Currently, there are 13 carmakers in the Indian market and the total number of models (including variants) on offer is 125-odd.

Not quite dead yet

Yet, the numeral and brick duo continues to account for well over a third of the market. Last year, the 800 and the Omni sold 151,976 and 58,610 cars, respectively. The 800 sells double the number that its closest rival (sometimes stablemate Zen, and, at others, Hyundai's Santro) manages to sell. But the two cars have become jaded and soon it could get tough for Maruti to continue to flog them. ''The B segment (which includes Maruti Zen, Hyundai Santro, Daewoo Matiz, Tata Indica, and Fiat Uno) has become the first choice of many first-time buyers. This process has been facilitated by convenient financing options,'' says Vinay Piparsania, Vice-President (External Affairs), Ford India Ltd. Seconds another gleeful Maruti rival, ''The Maruti 800 has gone from being a benchmark to becoming the lowest common denominator, as consumer aspirations have gone up.'' Khattar is more diplomatic: ''The profile of the 800 buyer has changed.''

It hasn't really helped that Maruti hasn't done much to sustain excitement around the model. The 800 got two facelifts in its 18-year history. The first one came relatively early in 1987, and the second a decade after that. What's worse, the second facelift is dismissed by some as a retrograde one, with Maruti wanting to give the 800 a jelly-bean shape that had worked so well in case of the Zen. Both times, there was no change in the engine of the car. That happened when Maruti moved to the multi-point fuel injection system in April 2000 but not by choice. The company was forced to make the change as judicial activism ushered in Euro II emission norms. The judicial activism was fuelled to a great extent by global carmakers, aided by Tata Engineering, which was retaliating against Maruti's move to have diesel (the USP of the Tata Indica) declared unsuitable for passenger cars.

Now, the competition is readying to throw another challenge at Maruti by launching a campaign to bring European safety norms in the country. ''Yes, we will push for Euro safety norms. We are trying to propagate it in a big way,'' says Rajeev Chaba, who heads marketing and sales at General Motors India. Maruti had been caught off guard even when the emission norms came in force. This time, and if lobbyists like Chaba are successful, it could be in a spot again. Adds Chaba: ''Safety norms have become one of the top 10 customer considerations from top 15 earlier. It will soon be among top five.'' Interestingly, what's driving the safety norms campaign is more than just concern for the customer. A Maruti rival admits candidly: ''You have to use technology as a barrier against Maruti. Otherwise, it is so gigantic in size and brand equity that it will be impossible to compete effectively against it.''

To be sure, if the safety norms do come in, the 800 will find it tough to pass muster because safety, as required by the European norms, comes from design and the design of the 800 is, well, two decades old. To meet the norms, it will require an enormous amount of re-tooling whose cost will no longer make it the cheapest car in the market-thereby eroding its very USP.

Finding a new horse

There are internal reasons that could bring the 800's tenure to an end. The dies and jigs at maruti's nearly 20-year-old plant are reaching the end of their lifecycles. Globally, one set of dies and jigs is considered good for one million units, no more. Khattar, on his part, however, says that more 800s will roll out this year than last year. But information gleaned by Business Today says Maruti's call-up (indications) to its 370 vendors seem to suggest that it would need components to assemble 180,000 this year, compared to 270,000 two years back. However, call-ups are not necessarily directly related to sales plans.

More important, Maruti has already embarked upon a phase-out plan for the 800. And the chosen one to become the next entry-level offering is the Alto lx, which has the same 800cc engine as the old horse. ''It has already become the entry-level car in the metros and big cities, where aspirations are high and airconditioning is considered a necessity,'' says a Maruti executive. What has accelerated the shift is the contemporary looks of the Alto lx and its price, which is only about Rs 34,000 higher than the 800 dlx's Rs 2,65,000.

The big challenge, however, will be to bring down the price of Alto lx to levels comparable with that of the 800std, the basic non-ac model. The Alto is already ''strategically priced'' by Maruti, which means the price of the car doesn't cover the cost of producing it. Its low sales volumes (in comparison to the 800's) and local content percentage (in the mid-eighties) don't make the job easier. The 800, on the other hand, is Maruti's cash cow, in sharp contrast with the global norm of small cars bringing in volumes and bigger cars getting the margins. The 800 is the world's cheapest car in terms of product costs, its local content is close to 100 per cent, and its high volumes lead to a low per unit cost and help the company drive a hard bargain with component suppliers.

But Maruti insiders, in private, express the hope that the Alto will gain volumes over time and will become cheaper as its local content is bound to go up. Given the high excise duty of over 40 per cent on car ACS, a non-ac model could be significantly cheaper. And Maruti is negotiating hard with component suppliers to cut prices.

''There are pressures from all customers to cut prices,'' says L. Lakshman, chairman of the Chennai-based Rane Group, supplier of steering columns, valves, and suspension parts to Maruti. Others in the industry say Maruti is now buying radial tyres for its 800cc models at Rs 675 a piece, Rs 150 less than what it paid last year. For 200,000 units, that alone would mean savings of Rs 12 crore. In the last three years, Maruti, which buys close to Rs 4,000 crore worth of components each year, has been able to effect an average reduction of 12-13 per cent in its component prices.

A second wind?

Cost cutting could also help in bringing down the prices of the 800 and help penetrate new markets. And a section of the Maruti management favours this. The idea is to narrow the gap between a top-end motorcycle and the entry-level car, so that potential mobike buyers can be targeted with the 800.

But not everyone in Maruti appears to be sold on such a strategy. First, car prices are determined by the market. Secondly, at about Rs 230,000, the 800std is already dirt cheap. With easily available long-term financing, an 800 can be purchased with a downpayment of Rs 30,000 and a monthly repayment of about Rs 4,000. Second, although it is widely believed that it will be a piece of cake for Maruti to cut prices since its plants are fully depreciated, Khattar says that's a myth. The first plant, which rolls out the 800, has seen annual investments of about Rs 100 crore for upgradation, besides a Rs 350 crore new paint shop set up when metallic colours were needed.

Says a Mumbai-based analyst: ''A price cut will not lead to an explosion in the market. What the 800 needs is product rejuvenation.'' Agrees Sona Koyo Steering Systems CEO Surinder Kapoor, a major supplier to Maruti: ''There will be more people aspiring for an 800, if it is given a facelift and if it's given a marketing thrust.''

In fact, Khattar and his team are flogging the 800 flat out. To increase its availability, over 50 centres have been identified as having potential buyers but no Maruti dealerships. These centres, however, have Maruti Authorised Service Stations, or mass, which will be empowered to book cars on behalf of the nearest dealer. That way, Maruti expects to suck up demand in rural and semi-urban areas.

But nevertheless, even Maruti knows its 18-year-old warhorse has to be retired sooner than later. And when that happens, the company's entry-level car will be the Alto lx. That's also when Khattar will have to sell his cars, and not just expect people to buy them.

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